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Cryptocurrency milestone: First SEC-qualified token sale in US history

Posted: 11 July 2019 12:30 pm
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Blockstack has just achieved a unique milestone in cryptocurrency, with wider implications for the space.

As elegant as it is, on first inspection the Blockstack website probably wouldn't stand out too much among other blockchain company websites.

And yet, there's something quite unique going on there.

First

That website is the digital location of the first ever SEC-qualified token sale under Regulation A+. That regulation means it's a token sale that is open to the general public rather than being restricted to accredited investors only.

The first reason this is a big deal is that it helps lay down a roadmap for legal, SEC-qualified initial token sales that the general public can participate in. This is a significant development in the context of a legal framework for allowing some of the benefits of ICOs without the many downsides, and for the future of tokenisation more broadly, given how useful it is for fundraising, the tokenisation of equity and similar.

But the Blockstack token, Stacks (STX), does not represent equity. Rather, it's fuel for the Blockstack network, similar to how Ether works on the Ethereum network. This is the second reason this is a big deal.

Beyond serving as gas and a utility on the Blockstack network, the function of STX is still ambiguous. Some people might start using it as a currency, some might use it similar to casino chips and some will undoubtedly be treating it as a speculative asset. Plus, through the Blockstack App Mining and App Staking system, it becomes a way of rewarding dapp developers and a token that can be staked on dapps.

It's a prime example of a digital asset that defies clear categorisation, and being able to receive SEC qualification under Regulation A+ adds a lot more solidity to that vague cryptocurrency roadmap to a more decentralised digital future. And that's what Blockstack is all about.

"It is a truly groundbreaking day for decentralized technology and, by extension, digital rights. No company on the internet should have so much power that it can debate if it should treat users in the right way or not. By building technology that can’t be evil, trusting centralised organisations to make the right choice is replaced by mathematical proofs," says Blockstack CEO Muneeb Ali.

"Almost every day, there are reports of corporations controlling and selling user data on a massive scale, with no regard for providing and protecting fundamental digital rights. Against this backdrop, regulation has been the number one topic of conversation and concern for decentralised technology since the birth of token offerings, and we are honored to advance this all-important sector as we work toward a future where violations of user trust are not simply admonished, but impossible. By inviting everyone, not just accredited investors, to contribute to Blockstack, we can effectively drive the long-term growth of our vision to build a decentralised computing network that will replace the current, siloed version of the internet with one that is open, fair, and user-controlled."

On the money

The token sale officially opens at 11am EDT on 11 July, also known as "today", depending on what time you're reading this.

A total of 180,333,333 tokens will be sold, in three different allotments:

  • 78,333,333 STX tokens are offered at a price of US$0.12 each to the current holders of early bird vouchers, to a maximum of $3,000 each.
  • 40,000,000 STX tokens are being offered for "non-cash consideration" in line with the App Mining system.
  • 62,000,000 STX tokens are being offered for $0.30 each to "qualified purchasers" as per the Regulation A+.

Unless someone is a voucher holder or a participant in the App Mining system, that third one is what they'll be getting into during the token sale.

Needless to say, this token sale is highly speculative, and it is not suitable for everyone. This is just an explanation of a landmark event in the cryptocurrency ecosystem, and so the information on this page should be viewed similar to how you'd observe an exotic animal in a zoo. It is not financial advice or a suggestion that anyone even think about purchasing STX tokens.

But purchasing probably won't be especially easy anyway, and assuming demand is high enough for that 62,000,000 STX ($18,600,000) allotment, a lot of people are going to miss out.

The sale will take place on a first come first served basis, Blockstack says, with the order of arrival being determined by the order in which payments arrive. It's using Coinlist for its payments, and so will be accepting BTC and ETH via blockchain, and US dollars via wire transfer.

Similar to Ethereum, the total STX supply is theoretically infinite, although it's going to have various burns and other money sinks.

It's also of interest to note that, according to Blockstack SEC filings, in October 2017 it sold 24 accredited investors a total of 323,435,373 between them, at prices of $0.00012 each. The tokens reportedly have a three year lockup period which started in November 2018 and were sold to existing Blockstack equity investors.

So, if you assume STX tokens hang out at their $0.30 sale price for the next couple of years, that means a 2,500x on-paper return on investment for those buyers. And if you assume that the purchase was equally divided among all 24 investors, it means an initial investment of $1,617.20 each (or about 0.33 BTC in October 2017 prices) would have turned into a cool $4 million.

It's a curious accounting footnote.

The group of 24 buyers were all existing Blockstack equity holders and all were presumably quite deeply involved in cryptocurrency. By October 2017, Bitcoin prices were up about 600% in the year to date, and yet this group of 24 was going in together for a funding round of less than $39,000 all up?

There's probably a funny story there.



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Disclosure: The author holds BNB, BTC at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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